A volatile year for agriculture

Volatility is the word that best summarizes agriculture in 2008, said John Hawkins, spokesman for the Bloomington-based Illinois Farm Bureau.

Steve Tarter

Volatility is the word that best summarizes agriculture in 2008, said John Hawkins, spokesman for the Bloomington-based Illinois Farm Bureau.

Record commodity prices, record oil prices, a new Farm Bill and a late harvest capped a growing season of extremes, he said.

"The inability of farmers to plan ahead was a key factor in 2008. Most farmers didn't know where they stood this year," said Hawkins.

The year's volatility also hit the ethanol

industry hard, he said. VeraSun Energy, the Sioux Falls, S.D.-based company that claims to be the largest ethanol producer in the United States, declared bankruptcy in November. A number of ethanol plants - in Illinois and around the country - had production plans scrapped or delayed due to high corn prices and, later in the year, falling oil prices.

As farmers sent an increasing amount of corn to ethanol production, corn-based ethanol was also portrayed as boosting food and fuel prices in 2008, said Hawkins.

"Ethanol had a 'kick-me' sign on its back when we had the high corn prices in the summer," he said.

Others point to the challenges the ethanol industry faces in the year ahead. "The demand isn't there for ethanol anymore due to the drop in gas prices that went from $4 a gallon at one point to around $1.50 today," said Keith Worner, director of the Tazewell County Extension office in Pekin.

But look for ethanol to continue to play an important role in agriculture in 2009, particularly in central Illinois, said Patrick Kirchhofer, director of the Peoria County Farm Bureau.

Despite weather challenges in 2008, Illinois farmers recorded big yields on the corn side, he said. "There were record-breaking yields in some cases. There were floods to the west of us but (central Illinois) recorded some excellent numbers," said Kirchhofer.

Worner credited seed companies with helping provide such a big corn harvest. "It goes back to genetics. Ten years ago, you wouldn't have seen 200-bushel (an acre) corn. Companies have done an amazing job of stacking genes," he said.

While seed prices are soaring, Worner said the latest hybrids do the job. "As a farmer, I'm willing to pay more for seed because I'm getting an additional 40 bushels of corn an acre," he said.

But farmers may need those additional bushels, said Worner. "The University of Illinois projects that farmers will need to get $5 a bushel for their corn just to break even next year. This year they needed $4 a bushel to break even," he said.

"Five years ago, if you had offered farmers $4 for corn, they would have been in hog heaven but today inputs (like seed, fertilizer and fuel) have gone up as much as 100 percent in the past five years," said Worner, who called the 2008 soybean crop "average."

Kirchhofer expects the volatility of 2008 to continue into the new year. "Everything is amplified these days. Agriculture is so globally tied in. There's more emotion in the markets. The swings are wider," he said.